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June 5 (Reuters) – India's economy grew at an unexpectedly strong 7.8% in January-March, the government said on Friday, as better farm output and brisker construction activity helped offset weakening external demand emanating from the Middle East conflict.
The print, the second in an updated data series with a revised base year and wider coverage, was well above a forecast of 7.2% growth in a Reuters poll of economists.
India estimates GDP growth for the full year that ended in March at 7.7%, the National Statistics Office said, compared with a forecast of 7.6% from February.
COMMENTARY:
ALEXANDRA HERMANN PRASAD, LEAD ECONOMIST, OXFORD ECONOMICS, LONDON
"A notable deterioration in private consumption was offset by stronger investment."
"We believe activity has already started slowing and will remain soft. The RBI's dovish hold will cushion financing conditions, but not enough to prevent growth from undershooting its forecast for the fiscal year."
RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE
"Growth wrapped up FY26 on a strong note. High frequency data for rural and urban demand had pointed to relative resilience in the quarter. While the U.S.-Iran conflict broke out towards the end of the fourth quarter of FY26, output in the quarter was relatively insulated from bulk of adverse impact."
"Markets are likely to move on from the backward looking data and focus on potential spillover risks into FY27, particularly given the prospect of a prolonged disruption in the supply of critical inputs to downstream industries, higher energy as well as food costs impacting purchasing power and tighter financial conditions."
VIKRAM CHHABRA, SENIOR ECONOMIST, 360 ONE ASSET, MUMBAI
"Looking ahead, uncertainty stemming from the ongoing West Asia conflict and elevated energy prices clouds the FY27 outlook, with growth likely moderating to 6.3%-6.5%."
SUJAN HAJRA, CHIEF ECONOMIST, ANAND RATHI FINANCIAL SERVICES, MUMBAI
"India's economy continues to confound the pessimists."
"Despite a weak global trade environment, domestic demand remained strong enough to keep India the world's fastest-growing major economy."
"Growth is likely to moderate in FY27 as global uncertainties rise, but with consumption, investment and policy support remaining favourable, an expansion of around 7% appears well within reach."
ADITI NAYAR, CHIEF ECONOMIST, ICRA, GURUGRAM
"Given the uncertainty around the resolution of the conflict, elevated energy prices for an extended period poses a downside risk to growth in the near term, including muted prospects for investment demand, negative impact on corporate profitability and dampening consumer sentiments."
"Besides, the potential development of El Nino conditions and weak monsoon forecast for 2026 have dulled the agricultural outlook and rural demand prospects for the second half. Assuming an average crude oil price of $95/barrel, ICRA pegs the GDP growth to slow down to sub-6.5% in FY2027 from 7.7% in FY2026."
UPASNA BHARDWAJ, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI
"Going ahead, we remain wary on the headwinds from the geopolitical and El Nino-led supply side shocks. Tightening financial conditions, higher inflation and weak monsoons could weigh across urban and rural demand."
"We expect GDP to hover in the 6% to 6.3% range, depending on how these risks play out."
SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM
"GDP growth surprised on the upside for the fourth quarter, led by stronger-than-expected growth in consumption, investments and valuables. The disruption due to the West Asia conflict in March seems to have had a limited impact on economic momentum."
"We do expect GDP growth to moderate in the first quarter of FY27, as elevated energy costs and their impact on margins weigh on growth. However, we anticipate upbeat export growth along with household consumption to provide support."
RAJEEV SHARAN, HEAD OF RESEARCH, BRICKWORK RATINGS, BENGALURU
"The central challenge for FY27 is preserving the domestic investment cycle against an increasingly adverse external backdrop, with the RBI rightly choosing vigilance over accommodation."
DK SRIVASTAVA, CHIEF POLICY ADVISOR, EY INDIA, GURUGRAM
"India's growth performance in 2026-27 will depend largely on a speedy normalization of global crude supply and prices."
PRATEEK ANCHA – SVP – BUSINESS ECONOMIC RESEARCH, AXIS BANK, MUMBAI
"The key takeaway from the March quarter GDP print is that India's growth cycle was on a solid footing before the recent geopolitical disruptions."
"High-frequency indicators through May suggest momentum hasn't deteriorated meaningfully, but if these shocks persist for another quarter, we may begin to see more evident cracks in growth."
(Reporting by Surbhi Misra, Anuran Sadhu, Nishit Navin, Saikeerthi, Aleef Jahan C S, Bharath Rajeswaran, Rashika Singh, VijayDattaram Malkar and Chandini Monnappa in Bengaluru, and Tanvi Mehta in New Delhi; Compiled by Dhanya Skariachan; Editing by Mrigank Dhaniwala)
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